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Possible Re-Valuation Program

Radio Broadcast

Daniel Gannon, Executive Director, Property Council SA (5AA 9.08-9.20) Speculation about possible five year re-valuation program to be undertaken by Valuer General

(Byner: Whilst Rob Lucas today at 3 o’clock will deliver his budget, there’s a matter that hasn’t been talked about too much that’s got enormous ramifications for everybody in South Australia ... in the 16-17 budget papers ... previous budgets, a five year re-evaluation program was going to be undertaken by the Valuer General ... the Valuer General at the time thought ... the values aren’t really right, they’re not relevant, let’s fix them, we’ll do a five year rolling average ... this was ditched by David Tonkin, the then Liberal Premier back in 1979 but it’s resurrected itself ... so what would it mean? In effect, there are 40,000 commercial and industrial properties that will be affected in South Australia some of which will find that their taxation rates are up by over 100% ... I’ve been asking the Treasurer to rule this out ... this back to the future five year rolling average but he hasn’t done it yet ... let’s talk to a bloke that’s done a little bit of work on this ... yesterday he had a meeting with a senior public servant who is espousing this policy. He’s the Executive Director of the Property Council, Daniel Gannon ... tell me about your meeting yesterday?) Good morning ... the Property Council met with a number of senior public servants yesterday and we checked up on the progress of this ... five year process of revaluing official land values in South Australia and I’ve got to say this is the greatest [unclear] issue for the state moving forward when it comes to the economy and when it comes to the budget. Believe it or not ... the Government hasn’t undertaken any economic modelling to better understand the likely increases for property owners. They haven’t even undertaken a modelling to better understand it from their own government revenue perspective and it’s not like the property sector is against recalibrating valuations ... if they need to rise then of course that’s the will of the market but at the moment there are whispers out of government that valuations could rise by anywhere between 20 and 50% across the board with some CBD valuations facing a potential doubling in valuation ... like any tax on any business, these costs have to be passed on to consumers. Land tax, that increases your rent ... whether you’re a residential or a commercial tenant ... renting would be more affordable if this tax was more fair and if it was more equitable- (Byner: Now are you suggesting that we’re going to continue with this?) ... it’s my understanding that the Government is pushing ahead ... this was a project initiated by the former government and at the moment, the new government is pushing ahead with it but one of the big problems with this particular project ... if we take a look around the country, South Australian property owners currently pay the highest top tier land tax rate in the nation ... almost 90% higher than Sydney ... almost 70% higher than Melbourne. Even Tasmania is more competitive but it’s also important to note that this exercise, as we’ve been informed for the last eighteen months, won’t just impact owners of commercial or industrial properties. It’ll also have a direct impact on almost 140,000 South Australians who own a residential investment property ... these people, they’re not property barons ... tycoons, they’re ordinary mums and dads and some of your listeners might know, it typically requires about forty trades or sub-trades to build a house, commercial properties as well, they need cleaners, gardeners, sparkies, maintenance workers to keep maintaining or upgrade a commercial building asset. But if valuations increase like we understand they will by anywhere between 20 50%- (Byner: ... let me get this right, this is because of a push for five year rolling valuations which we got rid of in ’79?) I wasn’t even a twinkle in my parent’s eye when this particular way of operating was removed but ... it’s really important to understand here that if these valuations drastically increase without a corresponding decrease in land tax rates to offset that pain, then the livelihoods of these workers ... like cleaners and gardeners and sparkies for commercial buildings, their livelihoods will be impacted as a direct result because owners won’t be able to afford them ... for example, rather than maintaining an air conditioning service quarterly, it might become an annual service for an owner of a commercial property and as a direct result of this five year rolling re-valuation, that the Valuer General right now is knee deep in, looking at how this Government can take more taxes from ordinary mums and dads, here’s the bad news, there’s more than a million people in South Australia who have a direct stake in a property sector through their super fund which means that us maintaining or worsening the land tax regime that we have... has a direct impact on mums and dads across the state, particularly self-managed super funds which means that their nest eggs will be eroded ... so the annual income of these superannuants will take a massive hit if land tax isn’t reformed and if the Valuer General and the State Government continue with this project as they currently are. (Byner: Stay on the line ...)

John Darley, Advance SA MLC (5AA 9.14-9.19)

(Byner: Advance SA’s John Darley ... has been having a lot of discussion ... is it your understanding that the Liberal ... Marshall Government will persist with this?) Well I haven’t been advised either way what the position is Leon but I can say that when the initiative first came up in the 16-17 budget, I asked the Valuer General for a copy of the specification of the project and one of the main questions that came out of that was ... in terms of valuations, what would be the outcome of the project and the answer was ‘not known’. They didn’t know whether the valuations would rise or fall. Now we do know that the Valuer General’s valuations have no revenue impact on water and sewage rates, Emergency Services Levy or Natural Resource Management Levy because those agencies have a specific budget for those items and the Valuer General’s valuations of capital value are used to apportion the tax burden between ratepayers. What the valuations have a direct impact on is land tax and I noticed in the specifications they divided up ... they were going to look at residential ... industrial commercial and they were looking at primary production ... most of the land tax in South Australia comes from the CBD and as Daniel mentioned, his group were advised that valuations in the CBD could increase by 100%. (Byner: People won’t be able to afford this.) ... the thing is ... land tax is based on the aggregation of all valuations, land value within an ownership ... an example of one case and it was only a reasonably low valued property where the valuation increased by 15% but the land tax increased by 30%. (Byner: Alright, explain to South Australia how this will affect them?) Well ... over the years when we ran land tax reform association meetings ... all land tax charged on business finally ends up in the prices of goods and services they provide so everyone will be contributing towards this. I have on fairly reasonable advice that this project was a cynical move by the Valuer General to generate $60-$80m a year in extra revenue and that can only come from land tax. (Byner: How can they say they don’t know what the revenue output is, they must have known? ... and why would do it without knowing you’re going to get more money out of it?) And why would any government of any political persuasion agree to hand out $15.45m over a four year period for a result that they didn’t know of? (Byner: Alright ... correct me if I’m wrong ... in today’s budget, the sting in the tail and probably not well promoted will be that automatically through a previous initiative from a different government, the land tax rates are going to rise significantly ... there’ll be some people who sell items in their property that can’t just load up the cost of the article otherwise they’d be totally uncompetitive ... so what can be done about this?) Well ... if this does occur ... well first of all, we need to have a look at the budget to see whether there’s any ... increased revenue projection for land tax for this year and over the forward estimates and if there’s an unexpected bubble as a result of this crazy project that’s been implemented by the Valuer General, well then the Government will be forced into reviewing the scale of rates. (Byner: Alright ...)

Back to Daniel Gannon

(Byner: Daniel Gannon ... what’s your next move?) ... the new State Government under Premier Steven Marshall and Treasurer Rob Lucas they have an opportunity to right the wrongs of the past State Government and at the moment they have demonstrated an appetite for land tax reform through some changes that we’ll see firmed up in today’s budget. (Byner: I spoke to Rob Lucas about land tax yesterday and he said he’ll be able to do something in 2020 but he didn’t at all mention that there is quite an increase coming because they’re changing back to the old system that we got rid of years ago.) That’s right and today it’ll be in black and white, we can look at the forward estimates in terms of the anticipated land tax revenue generated by Government and we’ll have a much better idea but ... if the State Government can’t fix up these wrongs of the past State Government then the state’s biggest private sector employer, being property, might very well fall to its knees. (Byner: Alright ... now we’re going to watch this very carefully because it does affect just about everybody. Did you know about this? See, I’ve been asking the Treasurer to rule this out – he hasn’t).